Up-to-the-minute advice, information, resources, and, on occasion, commentary on federal and New Jersey state income taxes, and the various New Jersey property tax rebate programs, and insights and observations on tax policy and professional tax practice, by 40-year veteran tax professional Robert D Flach.

Friday, January 20, 2012

ASK THE TAX PRO - NY NONRESIDENT TAX

I
recently received a question about NY non-resident taxation via a comment to an
older post.

“Hello,

I was wondering if I
was to work from home 5 days a week for a company with a NYC address would I
still be liable for NY taxes?

Thanks.”

As
with any question involving taxes the answer is “it depends”.It depends on the specific facts and
circumstances of your situation.

You
do not indicate whether or not you are an employee or the company with the NYC
address or if you are an “independent contractor”.I assume we are talking here about “telecommuting”.

Nonresident
employees of New York employers do not have to pay New York state income tax on
days worked physically outside of New York State.The allocation is made on Schedule A of Form
IT-203-B (Allocation of Wage and Salary Income to New York State). The instructions for this Schedule provide
that (highlight is mine):

“Work days are days on
which you were required to perform the usual duties of your job. Any allowance
for days worked outside New York State must be based upon the performance of
services which, because of necessity (not convenience) of the employer,
obligate the employee to out-of-state duties in the service of his employer.
Such duties are those which, by their very nature, cannot be performed at the
employer’s place of business.

Applying the above
principles to the allocation formula, normal work days spent at home are
considered days worked in New York State.”

The
TSB Memo notes (highlights are mine) -

“Under this rule, days
worked at home are considered New York work days only if the employee’s assigned or primary work location is at an established office
or other bona fide place of business of the employer (hereinafter, a bona fide
employer office) in New York State.”

For tax years
beginning on or after January 1, 2006, it is the Tax Department’s position that
in the case of a taxpayer whose assigned
or primary office is in New York State, any normal work day spent at the home
office will be treated as a day worked outside the state if the taxpayer’s home
office is a bona fide employer office.

A combination of several
factors are taken into account to determine if a taxpayer’s home office is a “bona
fide employer office”. For example -

·If some of the core duties of employment
are performed at the home office, then the home office will meet this factor.
For example, the core duties of a stock broker include the purchase and sale of
stock. Accordingly, if the stock broker executes stock purchases and sales from
the home office, this would constitute performing some of the core duties at
the home office. However, if the stock broker merely reads business
publications on the weekend, this would not constitute performing any core
duties at the home office.

·If an important part of the
employee’s duties include physically meeting with clients, patients or
customers in the normal course of the employer’s trade or business, and those meetings
are performed on a regular and continuous basis at the home office, then the
home office will meet this factor.

·If the employer requires the
employee to work from his or her home office as a condition of employment, the
home office will meet this factor. For example, if a written employment contract
states the employee must work from home to perform specific duties for the employer,
then the home office will meet this factor.

·If the employer does not provide the
employee with designated office space or other regular work accommodations at
one of its regular places of business, then the home office will meet this
factor.

If
you are a “self-employed” independent contractor, and your main place of business is your home, which is not located
in New York, and the NY-based
company is one of your clients or customers, and you do the work for this client or customer exclusively at your
home office I would say you do not have to pay NY state income tax on the fees
paid by this company.

Does
anyone disagree?

FYI
- NJ residents who regularly work as an employee at an office in New York do
not have to pay NY state income tax on regular working days when you attend a job-related
conference, convention, seminar, or other training activity, or visit a client,
in another state.For example, you
attend a training session in Connecticut, or spend two days at a client or
customer’s office in New Jersey.

By
allocating your days outside of NY you will probably pay less net combined
state income tax, because the tax rate is higher in NY than NJ on most levels. You would allocate out these days on Schedule
A of Form IT-203-B.

4 comments:

Anonymous
said...

I live in NJ but work in NYC. I moved to NJ in Dec of '09. While doing my state taxes this year, I realized I should have filed a NY Non Resident tax return LY to receive the NY & NYC tax credit. I efiled. Should/would the tax software catch my mistake? I am workering if I should ammend my 2010 tax return. Would it be better to go to a tax pro to do the amendment?

Can you cite the NJ code that requires a complete non-resident to pay NJ taxes while doing telecommuting work for a firm in NJ? A search of the NJ State web site finds no hits for "telecommuting" or related terms. Some hits at other sites for the reverse where a telecommuter actually lives in NJ.

Before contacting me with questions about how a blog post relates to your specific situation, please be aware that I do not give free tax advice to non-clients by e-mail, comment response, or phone. So don't waste your time and mine.